FX option

Product description

An FX option is a financial instrument, which gives its buyer the right, not obligation, to buy (if buying call options) or sell (if buying put options) an agreed amount of currency, at an agreed future date and a pre-agreed option strike price.

In case of call options, if the current market price at the expiration date is higher than or equal to the option strike price, the buyer of the option will exercise the option and buy the agreed amount of currency for the option strike price. Meanwhile the seller of the call option is unconditionally obligated to sell the agreed amount of currency for the strike price.

In case of put options, if the current market price at the expiration date is lower than or equal to the option strike price, the buyer of the option will exercise the option and sell the agreed amount of currency for the option strike price. Meanwhile the seller of the call option is unconditionally obligated to buy the agreed amount of currency for the strike price.

The buyer will pay the seller a premium for buying the option. The premium shall be paid two working days from the day of the transaction and is non-returnable.

The date of exercising the option differentiates between European and American style options. A European option may be exercised by the buyer only at the pre-defined time. An American option on the other hand may be exercised at any time before the expiry date.

The buyer of an option may select the option price, which he will have the right to use when exercising the option. The strike price may be lower or higher than the forward price quoted on the date of exercising the option. This difference determines the option premium.

Benefits

Customer benefits:

• The buyer can get an unlimited yield and at the same time mitigates the loss to the amount of the paid option premium. The buyer of an option will exercise his right when the current FX rates are good for him
  
• An option permits hedging receivables from export or import of goods, services and other FX receivables in any of the currencies listed in the FX Rates Table of Bank Millennium
  
• Possibility of setting any strike price (also higher or lower than the spot price) as well as individually defining transaction parameters as regards maturity and transaction notional
  
• In case of change of the Customer's exposure and expiration of the need to hedge a foreign currency sale or purchase, the Customer may resell the option to the Bank before its maturity
  

Risks

• Buying an option involves the need to pay the premium, which depending on the option parameters may constitute a major cost for the buyer
• Various factors affecting option value reduce transparency of pricing of such transactions and may strongly reduce the value of the instrument
• Restricted availability of the instrument due to notional - minimum transaction amount is 50.000 EUR

Risk description is provided in „Description of risks associated with financial instruments and products offered in the Biznes and Corporate Banking Segment in Bank Millennium S.A.", as available in the Bank's outlets and on the Bank Web site www.bankmillennium.pl.

Additional information

If you are interested in treasury products please contact a Relationship Manager in the nearest Regional Corporate Centre or call a Product Specialist/Dealer:

Bydgoszcz, phone: (52) 325 94 22 / (22) 598 20 20
Gdańsk, phone: (58) 307 91 29, (58) 307 91 02 / (22) 598 20 25, (22) 598 50 54
Katowice, phone: (32) 784 08 28 / (22) 598 20 31, (22) 598 50 61
Kraków, phone: (12) 620 71 40, (22) 598 50 56, (22) 598 20 23
Lublin, phone: (81) 531 77 45 / (22) 598 20 27
Łódź, phone: (42) 631 70 30 / (22) 598 50 50
Poznań, phone: (61) 885 69 75 / (22) 598 50 57, (22) 598 20 23
Szczecin, phone: (22) 598 50 55
Warszawa, phone: (22) 598 50 63 / (22) 598 50 64, (22) 598 20 22, (22) 598 20 29
Wrocław, phone: (71) 370 41 94 / (22) 598 20 05, (22) 598 50 53

Legal disclaimers

All the information contained in this publication is for information purposes only and does not constitute either an offer or recommendation, or invitation addressed to anybody (or any group of people) to conclude transactions in financial instruments presented therein. In particular, the information contained in this publication does not constitute an offer in the understanding of the Civil Code Act dated April 23 1964 and is not a service of investment, financial, tax, legal or any other advisory.

This publication contains position of Bank Millennium S.A. („Bank") expressed on the basis of its own assessment of the facts material for the Bank and relative laws. The Bank assures that has spared no due diligence for the information contained in this publication to be reliable and based on authoritative sources, however, it cannot warrant that the information from sources external to the Bank is reliable, complete or up to date. Additionally, the Bank advises that the information and analyses contained in the publication have been based on the information derived from public sources that have not been independently verified by the Bank, and furthermore, can be subject to periodic fluctuations. The Bank shall not be held liable for any financial consequences of customer's transactions in financial instruments described in this publication. Also, the Bank reserves the right to make changes both in the form and in the content of this publication, at any time and without prior notice.

The conditions contained in the publication are of indicative nature only. All prices and (or) examples of transactions serve as illustration only and do not constitute a transaction offer under such conditions, or indication that the transaction under such conditions is possible. Furthermore, any calculations or results presented in this publication do not warrant future profits. The real terms and conditions for transactions in financial instruments shall be marked to market as established at the moment of transaction conclusion. All the tentative price quotations and analyses contained in this publication have been prepared on the basis on assumptions and parameters reflecting Bank's assessment or selection. The Bank does not warrant precision, completeness or rationale of these quotations or analyses.

The risk of utilisation of the information contained in this publication, in particular, as regards taking investment decisions on the grounds thereof, shall be carried exclusively by its recipient.

Financial transactions entail a risk, as presented in detail in „Description of risk related to financial instruments and products at Bank Millennium S.A."1), available at Bank's outlets and website at www.bankmillennium.pl. Everybody who purchases financial instrument assumes and carries liability for tax obligations resulting from the laws in force. In view of the above risks and circumstances, Bank's customers should have indispensable knowledge and experience in order to evaluate nature of every financial transaction under review and risks related thereto. In case of any doubts, customers should use tax, legal or investment advisory services. The Bank shall provide any additional information reasonably requested by the customer to enable assessment of related risks and transaction character.

Conclusion of transactions in financial instruments by the customer constitutes the grounds to recognise that the customer reviewed the transactions and related risks, and accepted them.

Dissemination and distribution of financial instruments and trading in them, may be subject to limitations in relation to some persons and states, in accordance with proper legislation. Demonstration of legal capacity and authorisations for investment in a given financial instrument rests with the customer. Offering and trading in financial instruments may be performed only in compliance with proper regulations of the law.

The information contained herein is disclosed exclusively for its recipient. The recipient is not entitled to copy, reproduce or transfer and disclose it to third persons in any manner, be it in full or in part (except for transferring it to his professional advisors) without prior written consent of the Bank.